Budgeting and Managing Money

Understand the importance of budgeting in a business context. 

Reasons for budgeting may include:

• avoid getting into debt
• controlling costs
• remaining solvent
• future planning

Assessment Criteria

• 1.1

  Describe the advantages of planning a budget in a business context. 

Understand key financial concepts.

Learners need demonstrate an understanding of the terms price, cost and profit. Ways to improve profit may include: 

• increase price on some products
• no discounting
• reduce overheads
• review prices
• take cash discounting from suppliers
• know your stock

Assessment Criteria

• 2.1

  Explain the difference between price and cost and the concept of profit. 

• 2.2

  Describe how to improve profit through cutting costs, improving revenue and increasing prices. 

Know about income and expenditure. 

Examples of business expenditure may include: 

• fixed and variable costs
• operating costs, e.g. facilities management including cleaning, heating , lighting, business insurance
• staffing, e.g. pensions, national insurance, recruitment costs
• income tax and VAT

Examples on income may include:

• sale of product or services
• government funding
• loans

Ways of estimating income may include

• forecast sales over a specified period of time using sales volumes and selling prices
• estimate additional income

Assessment Criteria

• 3.1

  Describe the different kinds of business expenditure. 

• 3.2

  Describe different kinds of business income. 

• 3.3

  Explain how businesses estimate income, for example, forecasting sales volumes and selling prices. 

Understand how businesses manage key financial information. 

Key financial business documents are:

• business plan
• spreadsheets of income and outgoings
• bank statements
• payslips
• receipts
• invoices

The purpose of key financial documents may include:

• use of information for future financial planning
• monitor income and expenditure
• identify areas to reduce costs
• monitor irregularities
• record of financial transactions

Ways to check for errors may include:

• double check entry data
• balance sheets
• identify errors of omission or commission 
• independent advisor
• double entries

Assessment Criteria

• 4.1

  Explain the purpose of key financial business documents.

• 4.2

  Explain how financial information can be checked for errors.